Economic activity in the services sector continued to expand in August with some help from retail, according to the Institute for Supply Management poll of purchasing and supply executives in the United States.
The ISM Purchasing Managers Index (PMI) was up from July and entering its 26th consecutive month of expansion. The Manufacturing PMI slipped a bit in August month over month, though.
In the latest ISM Services PMI Report, the index registered 55.4%, up slightly from the month before and above the 50 score that separates a positive from negative view.
Steve Miller, chair of the ISM Services Business Survey Committee said sector PMI gained 1.3 percentage points up from July’s 54.1% score.
“The Business Activity Index remained in expansion territory in August,” he pointed out, “increasing 2.6 percentage points to 61.7% from July’s reading of 59.1%. The New Orders Index registered 60.9%, 3.7 percentage points above July’s figure of 57.2%. The Employment Index contracted for a second straight month with a reading of 47.8%, a 0.4-percentage point increase from the 47.4% recorded in July. The Supplier Deliveries Index registered 51.3%, 1.5 percentage points lower than the 52.8% recorded in July. This is the 21st consecutive month that the index has been in expansion territory, indicating slower supplier delivery performance.”
Supplier Deliveries is the only ISM PMI index that is inversed, as a reading above 50% indicates slower deliveries, which is typical as the economy improves and consumer demand increases.
“The Prices Index registered above 70% for the fifth time in six months,” Miller said. “The reading of 72.6% in August is 2.3 percentage points above July’s figure of 70.3%. The index has exceeded 60% for 21 straight months, with its 12-month average increasing by 0.4 percentage point to 68.5%, the highest since April 2023. The Inventories Index registered 56.7%, up 5.3 percentage points from July’s figure of 51.4%. The Inventory Sentiment Index expanded for the 40th consecutive month, registering 54.1%, up 1.6 percentage points from July’s figure of 52.5%. The Backlog of Orders Index remained in expansion territory for a seventh straight month, increasing 4.7 percentage points to 55.6% in August from July’s reading of 50.9%. The New Export Orders remained at or above 50% for the seventh month in a row, registering 56.3%, an increase of 4.3 percentage points compared to the 52% recorded in July. The Imports Index recorded a second straight month in expansion territory. The figure of 56.3% in August is an increase of 4.5 percentage points compared to the 51.8% registered in July.”
Miller added the August Services PMI 55.4% score “is 1.7 percentage points above the 12-month average of 53.7%. The uptick of 0.3 percentage point over July’s 12-month average of 53.4% marks the eighth straight month that figure has increased. The Prices Index registered 72.6%, broke the 70% threshold for the fifth time in six months and hit its highest level since August 2022, 72.6%. After six commodities were reported as down in price in July, that total dropped to a single commodity, fuel. Petroleum-related products, diesel and gasoline were again reported as up in price in August. Graphics processing units and steel were added as commodities in short supply. The Supplier Deliveries Index continued to indicate slower performance, however, the reading of 51.3% is the fourth straight decrease and is 2.4 percentage points below the 12-month average of 53.7%.”
The Employment Index, at 47.8%, “remained below its 12-month average of 48.8%. This index has been below 50% in 13 of the last 18 months. However, the Business Activity Index had its highest reading since hitting 62.7% in November 2022, and the New Orders Index had its highest reading since February 2023.
When reviewing survey respondents’ additional comments in the poll, Miller said tariffs and the Middle East conflict were again the most cited issues impacting respondent supply chains.
“Positive summer seasonality was also a common theme, with Accommodation & Food Services, and Arts, Entertainment & Recreation both among the five fastest-growing industries in August,” he said. “As a potentially positive sign for employment, there was a slight reduction in the share of companies cutting staff levels, down from 19% in July to 17.1% in August. The Business Activity and New Orders indexes at multi-year highs could signal a shift to increased employment in the services sector. The Backlog of Orders index reached its highest level since a reading of 55.9% in February 2026: Some respondents attributed increased backlogs to low staffing levels at their companies.”
Services industries reporting growth in August were: Mining; Real Estate, Rental & Leasing; Accommodation & Food Services; Wholesale Trade; Arts, Entertainment & Recreation; Educational Services; Retail Trade; Information; Professional, Scientific & Technical Services; Utilities; Transportation & Warehousing, and Public Administration. Services industries reporting a contraction in the month were Agriculture, Forestry, Fishing & Hunting; Construction; Management of Companies & Support Services; Finance & Insurance, and Health Care & Social Assistance.
The Manufacturing PMI registered 54.6% in August, one percentage point below the July figure of 55.6%. Still, the reading indicated that the overall economy continued in expansion for the 22nd month in a row, as a Manufacturing PMI above 47.5%, over a period of time, generally indicates an expansion of the overall economy, ISM maintained. The manufacturing industries reporting growth in August were: Primary Metals; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Textile Mills; Furniture & Related Products; Nonmetallic Mineral Products; Paper Products; Transportation Equipment; Fabricated Metal Products; Petroleum & Coal Products; Printing & Related Support Activities; Computer & Electronic Products; Plastics & Rubber Products; Machinery, and Food, Beverage & Tobacco Products. Manufacturing industries reporting a contraction in August were Wood Products and Chemical Products.
